Canada on track for stronger growth later this year: Flaherty

Jim Flaherty: Canada on track for stronger growth later in 2013

OTTAWA — Even as a major world lender dealt another blow to an early turnaround in the global economy, Canada’s finance minister was playing the calm card.

Jim Flaherty sought to quell concerns Wednesday of an economic downturn in this country, adding that the government is still on track to balance its budget and additional fiscal stimulus would not be needed.

As for worries of a housing crash, he said a recent cooling of the market is actually “a healthy thing.”

I think the prospects for stronger economic growth later in the year and next year are good

“I think the prospects for stronger economic growth later in the year and next year are good,” Mr. Flaherty told reporters in Ottawa. “I think we have adequate economic growth.”

Asked whether Ottawa would consider new stimulus spending, he replied: “I don’t see the need for it, quite frankly.”

The World Bank has taken a darker view globally. On Wednesday, it cut this year’s growth forecast for the world economy to 2.4% from a 3% estimate in June. The Washington-based lender has pegged 2012 expansion at 2.3%.

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“In what is likely to remain a difficult external environment characterized by slow and potentially volatile high-income country growth over the next several years, strong growth in developing countries is not guaranteed,” the bank said.

Mr. Flaherty is more upbeat on where Canada fits into that outlook.

“We’re looking at economic growth in Canada this year of somewhere around 2% . . . . We hope it will be higher than that,” he said.

The Canadian economy managed just 0.6% growth in the third quarter of 2012 and the final three months is likely to come in at 1.2%.

“The American economy is still struggling, although there are some more positive signs now than there were certainly a year ago in the U.S. economy, particularly in the housing sector,” Mr. Flaherty said.

“But these are still relatively small, modest growth numbers.”

Regardless, the minister said the Conservative government remains on schedule to eliminate the budget deficit — a hangover from Ottawa’s recession-era stimulus spending-spree — before the next election, expected in 2015.

“This takes into account, of course, that we are controlling our expenditures with some intensity. That does not require dramatic growth, modest growth is sufficient with our fiscal track,” he said.

Meanwhile, Mr. Flaherty acknowledged worries that Canada’s housing market was beginning to crumble from its post-recession highs. Those concerns intensified this week when new figures showed a big drop in December sales from a year earlier.

“Our concern with the housing market over the years was the danger of overheating in the residential housing market, including the condo market.

“That’s why, again last year, we took steps to tighten the residential mortgage rules, and the Office of the Superintendent of Financial Institutions, also took certain steps.

“Some of those steps, I think, are having and have had some cooling tendency in the residential housing market, which is what we wanted, so that we would avoid a boom-bust cycle in Canada. That’s the purpose. So that we’ll some slowing and that is viewed by me . . . as a healthy thing.”

Mr. Flaherty pointed out that despite the recent cooling in the existing market, “housing starts are still relatively strong in Canada.”